Whistleblower law needs teeth

The law to protect whistleblowers from unfair treatment by their employers came into force a decade ago. But the experience since then has shown that the law is useless in fulfilling its purpose. A study group of experts at the Consumer Agency discussing revisions to the law should come up with a proposal to substantially beef up the protection of whistleblowers and ensure proper handling of the information they provide.

The law was enacted in 2004 after accusations by insiders exposed a series of irregularities at major companies, including Mitsubishi Motors Corp.’s organized coverup of customer complaints about tens of thousands of defective vehicles and recalls of the products, mislabeling of imported beef by Snow Brand Foods Co. to obtain state subsidies and Tokyo Electric Power Co.’s falsification and hiding of data related to problems at its nuclear power plants. After it went into effect in 2006, companies and government offices set up sections to deal with information provided by their workers about wrongdoings. But such steps have not stopped various forms of retaliation by employers and government organizations against staff who blow the whistle on irregularities.

An Olympus Corp. employee in 2007 reported to the firm’s compliance section that his boss was attempting to recruit a worker from the firm’s trading partner, fearing that the boss’s act would harm the company’s trustworthiness. But he was suddenly moved to an inconsequential position. Although the Supreme Court in 2012 ruled in his favor in a damages lawsuit he filed against the employer and nullified his transfer, he was unable to return to his former position. He then filed another lawsuit and finally reached a compromise with Olympus and was awarded ¥11 million in settlement money last month.

A sergeant in the Ehime prefectural police who in 2005 publicly exposed an off-the-book fund that the police force had built up was quickly demoted to a petty position and was deprived of a chance for promotion. While the Matsushima District Court in 2007 ruled that his transfer was illegal and the ruling was later upheld by a high court and finalized, the officer was still denied a worthy position and he retired in 2009.

It should be noted that these cases represent only a tip of the iceberg. The Whistleblower Protection Law prohibits businesses and government offices from giving their workers unfair treatment such as termination of employment contracts, demotion or pay cuts on the grounds that they blew the whistle on illegal acts by their fellow workers or officials, but it does not carry penalties for violations. Whistleblowers who were treated inappropriately must turn to the courts to seek relief.

The Consumer Agency study group, composed of company officials, representatives of consumer organizations, scholars and lawyers, began discussions in June and is scheduled to draw up a recommendation by the end of this month, on the basis of which the agency will begin work to amend the law.

During the group’s discussions, many members reportedly suggested that criminal penalties should be introduced against employers who punish whistleblowers, but others opposed such a step. Yet others say the government should first give guidance to parties that punish whistleblowers and only take criminal action if they refuse to comply. To ensure adequate protection of whistleblowers, the law should be amended to include penalties for violations.

The group also reviewed cases in which employers failed to take action to correct wrongdoings brought to light by whistleblowers. There also have been cases in which employers simply sat on reports of irregularities on the grounds that the information was supplied by people, such as former employees, who are not covered by the whistleblower law.

Another issue with the law is that it sets overly strict conditions for protecting whistleblowers who report the irregularities that they’ve found to the media. Under the law, the whistleblowers must have reasonable grounds to believe that reporting the irregularities to the compliance section of their company or government office would lead to the destruction of evidence. Such conditions should be loosened so the media can take a more active role in revealing problems.

The agency’s study group should also consider whether it is appropriate to limit the protection provided by the law to active employees, and consider whether the scope of protection should be widened to include former employees, board members and people related to firms’ clients.

The bottom line should be that the law needs to be amended to have teeth to ensure that alerting wrongdoings will lead to concrete action and serve public interests and that the whistleblowers will be fully protected.